Lincoln Financial Group has unveiled its new flexible pension solution, which caters for both the accumulation and decumulation periods of retirement.
Based on the variable annuity concept popular in the USA, Lincoln says the i2Live proposition - which is only available through advisers – is the first offering to provide clients an income guarantee for both the drawdown and annuity parts of the product.
The retirement planning market is becoming increasingly popular with firms, as companies try to develop new propositions for people disillusioned with traditional annuities which they see as poor value for money.
Last year, Aegon Scottish Equitable launched the ‘5 for Life’ proposition as a way to boost retirement income, as it is an offshore bond not a pension. Meanwhile, Hartford and Living Time have both launched flexible annuity offerings in this target market.
However, Lincoln says its proposition is different in that it caters for both the saving and the spending parts of retirement. It offers clients an unsecured pension through the i2Live drawdown option up until 75 which can then be transferred into an annuity.
In addition, Lincoln says the guaranteed income – which is initially 75% of the maximum supportable income (MSI) that the fund can afford each year – can be switched on or off. It can apply to all or some of the fund, while five-yearly recalculations mean the guaranteed level could also increase regularly.
The proposition also allows members to decide whether they want regular or one-off payments, and under the drawdown part of the product any remaining funds will provide a choice of death benefits for dependants.
Lincoln says the proposition is a compromise between drawdown and annuities. The firm says it welcomes competition in this area which is currently made up of companies with links to the American variable annuity market.
The product is expected to be available to buy in July through IFAs only. Simon O’Connor, head of income in retirement at Lincoln, says there is a need for advice at the outset of the decumulation period, and a need to keep an eye on the investments, which allows advisers to build a relationship with the client.
The minimum initial investment into the product suite is £50,000, which can be followed up by additional payments of at least £5,000. Clients will have access to 68 funds and 12 external fund managers chosen with the help of Old Broad Street Research, who will also manage two specific funds.
Initial commission on the proposition can be paid up to a maximum of 3% of each payment, while trail commission up to a maximum of 1% of the value of the fund can be paid each year, and although there is no charge if a client converts from one i2Live product to another, further initial commission can be paid.
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